CEOs and the wealth of notions

Gross inequality does far more than breed resentment. It destroys millions of lives, devastates the access of the poor to basic needs, dehumanises
both its victims and its votaries, and undermines democracy itself, writes
P Sainath.

"The Prime Minister wants CEOs to create wealth for the nation. Then he wants them to take pay cuts." That's a slogan gracing the huge hoardings put up by a Mumbai
newspaper. It's over two weeks since Manmohan Singh asked the Confederation of Indian Industry's annual general meeting "to resist excessive remuneration to promoters
and senior executives and discourage conspicuous consumption". But the cries of wounded crorepatis still rent the air.

It must intrigue Dr. Singh that the media have been far more hostile than industry itself. After all, the CII had invited him to speak on `inclusive growth.' This is
the politically correct jargon of our times. His speech at the event was as vanilla as it gets. It bore no strictures, carried no warning. In effect, the super-rich
were told it was okay to be quite greedy, but not obnoxiously and conspicuously greedy. The subtle distinction escaped his audience and enraged the media. The speech
drew more editorials in a week than the subject of inequality did all of last year.

The front page stories were more editorials than news reports. Dailies ran whole pages of "debates" on inequality and CEO pay packets. Pages with headlines such as
"India Inc & India Red Ink". Most concluded that, actually, we're not so bad after all on the inequality front. The odd dissenter was published, giving the rest of
the rant a focal point and a soft target.

The media see themselves as the cutting edge of India's Brave New World. So it was earlier too, when the Bharatiya Janata Party-led National Democratic Alliance
hogged massive publicity for its India Shining campaign. Far beyond even what they had paid for with countless crores of public money. For the media, it was and is a
mission. One which produces that warm and righteous glow that only the happy wedding of Cause & Commerce can. The poll debacle of 2004 earned us a brief respite from
the mantra.

Weeks ago, Mani Shankar Aiyar made a far more devastating speech on the "classes and the masses". It drew a scathing picture of the state of things. The media
absorbed that more calmly. After all, Mr. Aiyar was not the 'architect of the reforms'. Dr. Singh was, so the sense of betrayal still pours out from the television
screens.

One thing stands out, though. The most hated line of the Prime Minister's speech (apart from daring to suggest that CEOs might survive on a few rupees less) was this:
"Such vulgarity insults the poverty of the less privileged". That annoyed the media. Should the `reforms' be derailed because of the `resentment' of some over the
success of others?

This is the debate at its lowest. Inequality has many faces. The kind we have nurtured in the `reform' years does a lot more than "plant seeds of resentment in the
minds of the have-nots." It destroys millions of lives, devastates the access of the poor to basic needs, dehumanises both its victims and its votaries, and
undermines democracy itself. It was there earlier, of course. What's new is the ruthlessness with which we have engineered its growth these past 15 years.

This week's big news is that Mumbai has topped Maharashtra's HSC results with a pass percentage of 76.67. That should not surprise us. The metro's schools and
facilities outclass those of other regions. True, even this time, the State toppers are not from Mumbai. They are from Wardha (in Nagpur division) and Amravati. Both
in Vidarbha. But at 47.5 and 51.08 per cent, the overall pass percentages of those divisions are dismal. They are way below the State average of 64.25 per cent. And
both have fared worse than they did last year.

Here's one reason why. Vidarbha, always electricity starved, saw 12- to 17-hour power cuts at the time the children were studying for their examinations. (It's a
region where schools re-open weeks late to avoid exposing children to excessive heat.) The great metro of Mumbai was spared this "power crisis." (Some of the well
meaning did write articles on how to be a good citizen and use your air conditioners more efficiently.) In one estimate, a 15-minute power cut in Mumbai could give
Vidarbha two hours of electricity. Half that would have helped the students with their examinations. Further, malls and multiplexes lead Mumbai's biggest power
guzzlers. But this is the city of 25,000 of India's 83,000 dollar millionaires. Not only home "to the largest number of affluent individuals," as an American Express
study puts it. But also having "the fastest growing affluent population in the world". So the darkness is banished to zones such as Vidarbha - which produces more
power than the other regions of Maharashtra.

Management guru Tom Peters long ago suggested that CEOs be called CDOs: that is, chief destruction officers. Because "you essentially get paid for
blowing up your own business before the competition does."

Inequality in the context of growing commercialisation of education means that millions of bright and talented students are shut out from a better future for want of
money. That rubs in an old truth. Merit = accident of birth + electricity. (And maybe a dash of geography.) In health, a fifth of Indians no longer seek any kind of
medical treatment. Because they cannot afford it. In law and justice, each month brings us a new and shameful example of how the law is not an ass but a far more
malleable creature.

Still, what outraged the media most was: CEO salaries. Touching them is "against the spirit of the reforms". Earlier this year, a programme on an English TV channel
asked: Has the reform process largely favoured the rich and corporations? Close to 70 per cent of an audience of younger generation corporate executives answered
`yes'. The anchor's own take was revealing. When one of the tycoons argued for 'inclusive growth' she laughed and told him: "You're sounding like a politician. That's
the language they use."

This fortnight's debate did have its moments. Its highlight: Planning Commission Deputy Chairman Montek Singh Ahluwalia defending the Prime Minister's statement on
television. Endorsing a call for corporate restraint must have been embarrassing for Mr. Ahluwalia. He said that, er, well you know, ahem, the Prime Minister did not
quite really, in his view, uh, say, exactly what was being ascribed to him. Then he brightened up. "It's an issue even in America," he said, quite rightly, of obscene
corporate salaries.

Well, it's been an issue there for two decades or more. Five years before Mr. Ahluwalia stumbled upon the debate in the United States, Merrill
Lynch, Lucent Technologies, Citigroup, and AT& T axed over 91,000 workers between them. The same year, their four CEOs took home more than $130 million in pay. (Plus
more millions in stock options and other sops). Lucent Technologies in fact (as the New York Daily News pointed out) reported a $17 billion loss and sacked
56,000 workers. Then it gave its CEO a $22 million payoff.

Management guru Tom Peters long ago suggested that CEOs be called CDOs: that is, chief destruction officers. Because "you essentially get paid for blowing up your own
business before the competition does".

In India, the ILO reports that labour productivity shot up 84 per cent between 1990 and 2002. But real wages in manufacturing fell 22 per cent in the same period. It
sees this as "an indication of deterioration in the incomes and livelihoods of workers. Despite the increasing efficiency of their labour." This was also a period
when CEO salaries had begun clocking all-time records. Even now, top-end compensations in India are growing much faster than in the U.S.

Meanwhile, two days after the Prime Minister's speech, the media hailed the New Dawn. The emergence of India's first trillionaire in Reliance chief Mukesh Ambani. As
one writer puts it: "expressed as a percentage of profits, Indian company heads are far above their global counterparts ... For every Rs.1 crore earned as profit, the
Indian CEOs take home Rs.16,800." Global CEOs take home Rs.9,900.

"Government cannot legislate CEO salaries." That's a line running through most attacks on Dr. Singh. They do legislate taxes, though. And also a
low-end wage. About the one thing Tony Blair can look back on without shame is his government's minimum wage law. The Guardian points out that as a result of
it, "Britain's lowest-paid workers enjoyed a higher improvement in their standard of living since 2003 than those in any other European country."

Over five years ago, Paul Krugman, in a devastating piece on inequality in the U.S., found it obscene when a CEO there earned a thousand times what an ordinary worker
did. What about us? Presently, the average package of the top five Indian CEOs is around Rs.13.5 crore. The lowest paid workers in their own companies would earn
15,000-20,000 times less. If we compare these top incomes to those of agricultural workers, the gap would be 32,000:1 or worse.

Dr. Krugman argued that it was not simply economic well-being that such levels of inequality threatened. It was democracy itself. He's in good company. Decades ago,
the architect of a very different kind of reforms than those Dr. Singh represents, put it sharply. Dr. Ambedkar warned that a lack of economic and social democracy
would spell doom for our political democracy. In Dr. Krugman's own nation, long ago, Justice Louis Brandeis said the same thing: "We can have concentrated wealth in
the hands of a few or we can have democracy, but we cannot have both."

Anil Kamath
Major parts of India's growth have been due to non-manufacturing sector, and so are the CEO salaries that we are mostly talking about. If we were to compare the real wages of the average employee in the non-manufacturing sector we will definitely see a steep increase.

June 18 2007, 6:37 AM ·
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Abraham Karammel
It is great that India Together is bringing up matters that really impact India. I really appreciate that our non-politician, economist Prime Minister appealed the CEOs to create wealth for the nation and to make cuts in their remuneration. It is only lack of knowledge and lack of fairness which cause lack of understanding to this appeal and to criticise it. Even the German President made a similar appeal recently to German CEOs, when the leading German Bank Deutsche Bank announced big profits and corresponding big remuneration to its CEO and in the meantime cutting the number of employees. It should be noted that the CEOs in Germany do not get remunerations as high as in the US, and also that compared to the US there are less people in Germany who are below the poverty line. It should also be noted that in 2007, India overtook Japan in the number of Millionaires while China has still less in this super rich class.
Indias policy should be 'control the rich and help the poor', so that the gap between the rich and poor become smaller. What is happening today in India and in most of the world is the opposite. This is mainly caused by the effects of globalisation, where the super rich and multi-national companies use the most modern tools, techniques and mobility to make them richer.
What India really needs is fast and comprehensive socio-economic development. After years of personal research I discovered two very efficient MODELS OF FAST SOCIO-ECONOMIC DEVELOPMENT. They are Singapore and Porto Alegre (Brazil). Porto Alegre's Participatory Budgeting (PB) is now world famous as 'Porto Alegre Innovation'. Because of its efficiency, very democratic features and its practicality, this process is now adapted in developing countries Argentina, Chile, Mexico, Uruguay, Paraguay, and in developed countries Canada, England, France, Germany, Italy, Spain etc. In fact Porto Alegre Innovation is the only process which can give India the fast development it badly needs. The specific feature of this process is that in addition to the directly elected city mayor and the councillors, a third administrative and overseeing force came into play in Porto Alegre, viz., the Participatory Budgeting Council (PBC). The PBC is a body of peoples representatives elected for one year at a time. There are two each PBC councillors and two alternates from each of Porto Alegres 16 wards.

July 01 2007, 8:44 AM ·
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Vispi Jokhi
Inequality bordering on the obscene is the order of the day and I think the PM's statement is far too inadequate and mild. Creation of wealth is for the nation and the concept of trusteeship where corporates consider welfare of the workers an issue of paramount importance must be the order of the day. Examples of the Tatas and Bajaj family in India and Bill Gates and Warren Buffet can act as inspiration to corporate India t help get rid or minimize this inequitable wealth distribution,

July 18 2007, 12:25 PM ·
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hliri
Very interesting article. Can the govt plan like this..?? suppose if a person earn more than sevty thousand a month he can sponsor poor village students say Rs 5000/ per month, these children can have better education, the fee should go straight to the school, good school, there are many people who are earning more than that. The more we eran the more we should sponsor student, i think this kind of system is beign practice in Switzerland.

August 08 2007, 9:39 AM ·
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himanshu
Good points.
Scripture suggest that 1/40th part of our resources (time, money, labour) should be gifted to serve the needy. Hence, if you work 2000 hours a year, making Rs.80,000 a year, please give 1 hour every week with Rs.200 every month to society. I do.

August 28 2007, 5:17 PM ·
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Mitesh Damania
People can control corporates in two ways: On the consumption side and the investment side. By consuming from smaller entities who mind fairness and balance we avoid the corporate stranglehold on the economy. On the investment side, we should invest only in companies that share our values. So pull your money out of shares of companies that do not meet your values. In the long run it is better for everyone. Coops investments and micro lending are the way to go.

April 16 2008, 1:40 AM ·
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Gaurav Singhal
Greater equality through leveling up is excellent. But equality through leveling down - exemplified by 97.75% income tax and 3% wealth tax in Indira Gandhi's Garibi Hatao phase - helps nobody. Poverty did not fall at all in that era.
The standard measure of inequality is the gini-coefficient. This is lowest (just 0.17) in rural Bihar and Assam. Are these areas paragons of fairness and justice? No, they are sloughs of despond, where equality denotes lack of opportunity, not fairness. That's why people migrate from these egalitarian areas to cities, which are very unequal but provide opportunity.
-Swaminomics, The Times of India, 29th Jan 2012.

January 30 2012, 4:24 AM ·
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